How Does Inflation Impact The Logistics Industry?
The numbers from the United States Department Of Labor regarding the inflation rate for March 2022 are in and they are not good. In comparison with just a year ago, prices for pretty much everything has risen by 8.5%. That's a serious condition called inflation and it hurts everyone's pocket. From the average American trying to keep a roof over their head to big corporations with high operational costs, everything is now costing more and no one is footing the bill for them. What’s even worse is that the trendline does not look like it has peaked yet which means that inflation is only going to continue to rise.
As for the logistic industry rising inflation numbers present a huge challenge to keep operations running smoothly and truck drivers content. Across all industries it’s hard to find laborers and it’s even more challenging for intermodal shipping companies to retain responsible drivers for its fleet. It’s not like hiring a tradesmen to paint your home where if the job is not done right someone else could be hired. In the trucking industry there is no room for error as a forty foot hunk of steel needs to be transported safely and efficiently. That’s why it’s crucial for logistics companies to keep its drivers on board even if it means raising wages to battle the rising inflation rate. We will discuss many of the fallouts from the current inflation surge hurting the trucking industry.
Economic Growth To Slow Down
Unbeknown to many Americans the economy was on a rebound ever since the businesses started to reopen their doors after the global shutdown due to the COVID-19 pandemic. The gross domestic product or better known as GDP increased by 5.7% in 2021. But when prices surge by 8.5% you don’t have to be a rocket scientist to figure out that economic growth is going to be hampered. All of this is why economists believe that there is a one in three chances of a recession in the near future. That is not good for anyone as people and businesses will stop spending money because there won’t be any more money to spend. At that point everyone will go into recovery mode and try to survive while paying back whatever debt they owe.
Economic stability and growth requires people to have enough money for the basics and some more to spend. But when the economy hits the point of a recession it’s almost like there is an economic freeze. Try and imagine if your bank accounts are frozen and you can’t spend any of your money, that’s exactly what a recession is but on a domestic and global level. It’s not that people or businesses don’t have the money, it’s just that the money is on reserve for basic operational expenses and that is what causes the economy to slow down. No one knows if there will be a recession but it’s always good to be prepared for one.
Rising Cost of Fuel Hurting The Trucking Industry
One of the major stories that is pretty much in everyone's feed is the rising price of fuel. According to AAA, the current national price for a gallon of gas is $4.08. That is around a 30% increase from the $2.86 price per a gallon of gas just a year prior. The problem for the trucking industry is that the rigs that haul shipping containers across the United States of America require diesel fuel. The current national average for the price of a gallon of diesel gas is $5.01. That means the cost of filling up two 150 gallon tanks of a semi truck (one on each side of the truck to help balance out the weight) is currently $1,503. Each logistics company has multiple trucks to fuel and depending on how many miles each delivery is will determine how often these trucks will need to refuel. One intermodal shipping company in Amarillo, TX has a fleet of 30 trucks. That means the current cost to fuel these trucks cost over $45,000.
So What Is The Root Cause Of The Rising Inflation Rate?
Speaking of the devil, energy (or better known to laymen as fuel) has the greatest impact on surging prices. Even though there is talk of electric trucks being produced by Tesla, these are not the ones hauling shipping containers across the United States. On top of that, the politicization of fuel has caused the US to be more reliant on purchasing oil from other countries. The closure of the Keystone XL Pipeline has had a direct impact on energy prices which could have brought oil straight into our country without having to hire expensive marine shipping companies to deliver from overseas.
It is not uncommon for politicians to be so out of touch but to this extent is unheard of! The folks in Washington DC have absolutely no idea that the basic essentials like food, clothing, and shelter are all delivered by semi trucks which are powered by petroleum. True, there are state senators that understand this but unfortunately the majority don’t. If they would have just a little insight into how goods are transported via intermodal methods of transportation they would not be punching their green agendas down the American people’s throat. It’s a big problem and until each individual in the United States of America understands that elections have consequences the inflation rate will continue to soar due to rising energy costs.
Senate Democratic Majority In Major Trouble
With the United States midterm election just around the corner, 435 congressional seats, and 34 senate seats are up for grabs. The Democratic Party currently holds the presidency, and both the senate and congressional majorities. However with inflation on the rise people will tend to lean towards a representative that cares about their wallet and that will likely flip some seats. You see, what politicians don’t understand is that if the people in their state or district can’t afford basic necessities due to policies that they have voted on, there is a good chance that the people will vote for someone else that might be more economically friendly. With that being said Democrats are likely to be in for a bloodbath this November and the Republicans are expected to take the house if they can convince voters that they will make changes. That is a pretty big “if”, because Republicans don’t always have the fight in them to make changes and fight the good battle for good people. Time will tell what will happen but until then many hard working Americans will continue to struggle to pay for basics like food, shelter, and clothing.
Inflation Causes Trucker Wages To Increase
Not only does inflation impact the cost of living in our everyday lives, it causes an increase in wages for laborers. This includes truck drivers who are trying to make a living on an hourly rate and now need to make more to subsidize the cost of rising prices. Logistics companies must do whatever it takes to keep these drivers on board in order to keep operations running smoothly. It's justifiable for the workers to want to be compensated because it now costs more to live. At the same time, it's difficult for the shipping companies to raise wages when they have an increase in fuel costs and other operational expenses. It’s a hard situation for everyone but someone is going to have to pick up the tab.
Who Will Be Paying For The Increased Cost of Freight?
Unfortunately, the extra cost of shipping goods throughout the United States will fall onto the American people. It’s a ripple effect, rising costs of energy leads to higher shipping rates and the price for consumer goods increases. The only problem is when the consumer begins to stop paying for the product. That means demand decreases and retail businesses are forced to either lower their prices or slow down manufacturing. Sometimes there is a stalemate and neither the manufacturer or consumer budges; that's called a recession.
The surge in prices for both products and services is on the rise due to inflation. Government officials are saying that the Russian-Ukrainian war is the reason for increased fuel cost but it’s not. Our global economy survives only because of energy and when the cost of energy is on the rise it impacts everything. People have to figure out if they will pay more or will they be able to do without a product or service. The US Economy is powered by the American people and if they don’t have the funds to pay for anything else than basics, we can expect a slow down. The most frustrating thing of all is that if the United States would be able to generate their own energy, this would have a direct impact on the inflation rate. People have to begin electing officials who will have an impact on their wallet. It’s not about Democrat or Republican, it’s about being there as an elected official and having the best interest of the people you represent.